Amazon Earnings Results: AMZN stock advances 13% on Q2 AWS growth

• Amazon stock advanced more than 5% on Wednesday.
• AMZN Q2 earnings are expected after the close on Thursday.
• Amazon has missed four revenue forecasts from Wall Street in a row.

UPDATE: Amazon reported a loss of $-0.20 per share on revenue of $121.2 billion for the second quarter. The bottom line missed the expected $0.12 by 32 cents, but the market wrote it off since it greatly depended on a write-down on Amazon's stake in Rivian that amounted to a -$3.9 billion loss. Instead, the market chose to focus on the bottom line beat and Amazon Web Services growth. The former outperformed analyst consensus by $2.1 billion. The latter grew revenue by 33% to $19.7 billion. The latter was enough to push up AMZN stock by 13.6% to just shy of $139 after-hours, with observers pointing out that Amazon had been much too sold off heading into earnings.

If the market is a bit nervous ahead of Amazon (AMZN) earnings, it is not showing it. AMZN shares rallied 5.4% to close at $120.97 on Wednesday. The largest online retailer will issue second-quarter earnings results after the close on Thursday. Amazon has a rather poor track record of late. Founder Jeff Bezos' company has missed earnings forecasts two out of the past four quarters and four revenue projections in a row. 

Also read: Amazon Stock Deep Dive: AMZN price target at $106 with near-term risks offset by long-term growth

For the second quarter, Wall Street analyst consensus expects adjusted earnings per share (EPS) of $0.12 on $119.16 billion.

Amazon Earnings: Zero reason to expect a beat

Amazon revenue grew just 7% YoY in the first quarter, and that was before everyone realized how badly inflation was getting out of hand. Now, with many indicators pointing toward recession, such as the inversion of the 2-year and 10-year treasury bonds and the Atlanta Fed's GDPNow forecast, it would seem this is the most likely time for an earnings and/or revenue miss after a string of misses has already taken place. Already, Alphabet (GOOG) and Meta Platforms (META) have missed projections, and Walmart (WMT) issued a reduced outlook based on shifting consumer spending patterns.

One statistic that stands out is that of the 31 EPS revisions for Q2 that have been issued in the past 90 days, every single one was a downward revision. Another way of looking at the $0.12 per share that is expected is that Amazon has not produced quarterly earnings this low since the fourth quarter of 2017.

The graph below, courtesy of Bloomberg, demonstrates how cash from operations has been plummeting since the first half of 2021. In fact, cash from operations had been booming until just before founder Jeff Bezos announced an early retirement in May 2021. Ever since he left, metrics have been falling apart.

Amazon CEO Andy Jassy is beginning to make a name for himself, and it is not a good one. Hopefully, he proves me wrong on Thursday evening. Otherwise, investors may grow weary and begin a chant to get Bezos to return from vacation. 

Of course, there is always Amazon Web Services (AWS). Investors hope AWS once again saves the day. In the first quarter revenue of $18.44 billion grew 36% YoY. However, Mizuho Securities says recessionary fears are causing IT departments to reduce spending and that this may lead to discounts of AWS productions by as much as 10%, especially in the back half of the year. If true this should affect guidance going into 2023 for AWS.

"We are conservatively reducing second-half e-commerce estimates, assuming consumer spending slows after stable summer trends," wrote Oppenheimer in a recent note to clients despite having a long-term bullish rating on AMZN stock. 

Amazon stock forecast

Amazon stock's chart is showing an entirely different story from the earnings angle. The market seems to be thinking that AMZN has bottomed out. Both the Moving Average Convergence Divergence (MACD) indicator and the Slow Stochastic below it are showing positive signs.

The Slow Stochastic has begun moving out of the oversold range. The MACD has crossed over and is heading back toward the zero threshold. Additionally, 13 weeks of selling pressure appear to have ended last week.

AMZN stock is right below resistance at $124. A breakthrough there would lead to further resistance at $135.40, the low from late January. The 30-week moving average is resting right on the $135.40 level as well and so adds importance to this price. Short-term support is at $115 due to the existence of the 15-week moving average. Mid-term support sits at $102.50, and long-term support is nearer the $90 region.

AMZN 28-7-22